Argentina triggered a fresh diplomatic row with Britain on Thursday over the disputed Falkland Islands after the country's Congress passed a law that establishes criminal sanctions for the "illegal exploration" of hydrocarbons in the Argentine continental shelf.

A statement from the Argentine embassy in London said "the law provides for prison sentences for the duration of up to 15 years; fines equivalent to the value of 1.5 million barrels of oil; the banning of individuals and companies from operating in Argentina; and the confiscation of equipment and any hydrocarbons that would have been illegally extracted".

In its response, the British Foreign Office said that "the UK government unequivocally supports the right of the Falkland Islanders to develop their natural resources for their own economic benefit.

"Argentine domestic law does not apply to the Falkland Islands or South Georgia and the South Sandwich Islands, which are UK overseas territories."

The Foreign Office added that hydrocarbons activities by companies operating on the continental shelf of the Falkland Islands are regulated by legislation of the Falkland Islands government, and in accordance with the United Nations Convention of the Law of the Sea.

Reports said the Argentine embassy had already sent more than 200 letters to companies directly or indirectly involved and warning them they are liable to administrative, civil and criminal actions.

The London Stock Exchange and investment banks assessing equity values of oil explorers have also reportedly been sent such letters.

About 650 Argentines and 255 Britons were killed in the 1982 war that started after Argentinian forces invaded the islands, prompting Britain's prime minister at the time, Margaret Thatcher, to dispatch a naval task force to retake them.